Sardar Singh Vs Smt. Krishna Devi and another[ ALL SC 1994 APRIL]

KEYWORDS:-family arrangements-partial enforcement of contract instead of refusal of specific performance in its entirety-

c

” the award did not create any right, title or interest in the appellant for the first time, but it declared the pre-existing factum, namely the appellant and Kartar Lal purchased the property jointly and that Kartar Lal was the benamidar and that both of the brothers had half share in the house with a right to enjoyment of the property in equal moiety. Thus the award is not compulsorily registrable”.

DATE:-26-04-1994.

AIR 1995 SC 491 : (1994) 4 SCC 18 : JT 1994 (3) SC 465 : (1994) 2 SCALE 719

(SUPREME COURT OF INDIA)

Sardar Singh Appellant
Versus
Smt. Krishna Devi and another Respondent

(Before: K. Ramaswamy And N. Venkatachala, JJ.)

Civil Appeal No. 2637 of 1994 (arising out of S.L.P. (C) No. 1875 of 1991), Decided on: 26-04-1994.

Registation Act, 1908—Sections 17(1)(b) and 49—Non-testamentary instrument—Registration—Necessity of—Award of Arbitrator creating rights in immovable property—Its registration is compulsory—Award only declaring the pre-existing factum of purchase and not creating any new right does not compulsorily require registration.

Specific Relief Act, 1963—Section 20(1)—Specific performance of contract—Exercise of discretion—Considerations for—The discretion should be exercised on sound judicial principles—Agreement to sell not binding on co-owner who was not party to the agreement—Partial specific performance in respect of the share of property under the occupation of other co-owner, granted.

Judgment

K. Ramaswamy, J—Leave granted.

2. While the appellant was in Govt. service, Kartar Lal (first defendant in the suit), his brother had purchased on April 7, 1959 the house bearing Municipal No. 313, with land admeasuring 222 sq. yards in Karol Bagh from the Ministry of Rehabilitation. On January 22, 1963 the sale certificate was issued in favour of Kartar Lal. Finding it exclusively in the name of Kartar Lal, the appellant raised a dispute which was referred to named private arbitrators for resolution. The two arbitrators by their award dated October 16, 1963 declared that:

“We award that Shri Sardar Singh is the owner of half house bearing Municipal 313, Ward No. XVI situate at Gali No. 10, Faiz Road, Karol Bagh, New Delhi, from the date of purchase of the said house, i.e. from 7-4-1959 as he paid ` 18,100/- to Shri Kartar Lal in the shape of claim bonds valued at Rupees 11,560.00 and ` 6,540.00 in cash towards the purchase price of the said house and Shri Kartar Lal paid half of the price of the said house in the shape of claim bond and cash. The price of the said house was contributed half and half by both of them. Though, the sale deed was taken by Shri Kartar Lal in his name benami but actually Shri Kartar Lal and Shri Sardar Singh, are the owners of the said house in equal share from the date of its purchases, i.e. from 7-4-1959 and Shri Sardar Singh, is also entitled to half the amount of rent of the said house from the date of its purchase after deducting property taxes paid by Shri Kartar Lal.”

On an application made under S, 14 of the Arbitration Act, 1940 by the appellant, the arbitrators produced the award in Suit No. 299/63 in the Court of the Judge, First Class, Delhi which was made rule of the court under S. 17 thereof by decree dated December 28, 1963. The appellant laid proceedings before the Rent Controller for eviction of their tenants for personal occupation on the ground that he being a Government servant was entitled to possession under special procedure prescribed under that Act and accordingly had possession. Kartar Lal entered into a contract of sale of the entire property with Joginder Nath, husband of the first respondent on January 15, 1973 for Rupees 90,000/- and had received part consideration. The time to execute the sale deed was extended from time to time up to December 31, 1979 by which date Joginder Nath died and the first respondent had entered into fresh contract with Kartar Lal and laid the suit in O.S. No. 2/83 against Kartar Lal. The appellant, becoming aware of the contract of sale and pending suit, got himself impleaded in that suit as second defendant. The trial court by decree dated May 5, 1986 decreed the suit. On appeal the High Court of Delhi in R.F.A. No. 206 of 1986 by judgment and decree dated November 21, 1990 confirmed the decree.

3. The courts below found that the appellant’s title is founded upon the award to acquire title to or to divest the title or Kartar Lal; it is compulsorily registrable under S. 17 of the Registration Act, 1908 and being an unregistered award the same was inadmissible in evidence as source of title under S. 49 thereof. The appellant’s claim as owner of the half share in the property was thus negatived. The question, therefore, is whether the award, on the facts and in the circumstances, is compulsorily registrable under S. 17 of the Registration Act which reads thus:

“17. Documents of which registration is compulsory:-

(1) The following documents shall be registered, if the property to which they relate is situated in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864 or the Indian Registration Act, 1866 (20 of 1866) or the Indian Registration Act, 1877 (3 of 1877) or this Act came or comes into force, namely:

(a) **********

(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immoveable property.”

4. Section 49 declares the effect of non-registration that no document required under S. 17 …..to be registered shall have an effect in any immoveable property comprised therein……or be received as evidence of any transaction affecting such property……unless it has been registered. A conjoint reading of sub-sec. 17(1)(b) and Sec. 49 of the Registration Act establishes that a non-testamentary instrument which purports or operates to create, declare, assign, limit or extinguish in present or future, any right, title or interest, whether vested or contingent to or in any immoveable property of the value of ` 100/- and above, shall compulsorily be registered, otherwise the instrument does not affect any immoveable property comprised therein or shall not be received as evidence of any transaction affecting such immoveable property. This court in Lachhman Dass v. Ram Lal, (1989) 2 SCR 250 at 259 C and D , held the purpose of registration that:

“…..In other words, it is necessary to examine not so much what it intends to do but what it purports to do.

The real purpose of registration is to secure that every person dealing with the property, where such document requires registration, may rely with confidence upon statements contained in the register as a full and complete account of all transactions by which title may be affected. Section 17 of the said Act being a disabling section, must be construed strictly. Therefore, unless a document is clearly brought within the provisions of the section, its non-registration would be no bar to its being admitted in evidence.”

5. The award made by a private arbitrator is non-testamentary instrument under Section 17(1)(b), though the counsel for the appellant contended contra and we need not dilate on this aspect. In Satish Kumar v. Surinder Kumar. (1969) 2 SCR 244 an arbitrator was appointed by the parties without reference to the court to partition their immoveable properties. An award in that behalf was made and on an application under S. 14 of the Arbitration Act, the award was made a rule of the court. The question arose whether such award was admissible in evidence as affecting partition of the immovable property. This Court held that the award required registration under Sec. 17(1)(b). therefore, the award is a non testamentary instrument.

6. The question, therefore, is whether the award in favour of the appellant creates any right, title and interest in half share of the house is his favour or extinguishes the right, title and interest therein of Kartar Lal. It is, therefore, necessary to examine the award not so much to find what the award intended to do, but what it purports to do and the consequences that would flow therefrom. In this behalf we cannot accept the contention of Sri. M. C. Bhandare, learned senior counsel, that award does not require registration as it merged in the decree of the civil court making it as a rule of the court. As seen in Satish Kumar’s case (supra), this court found that in case the award, if it creates for the first time a right in the immovable property of the value of ` 100/- or above, in the absence of its registration, the awardee would not get title on the award and the title would remain with the party against whom the award was made. The same view was reiterated in Ratan Lal Sharma v. Purshottam Harit, (1974) 3 SCR 109 and in Lachhman Dass’s case (supra). In all these cases this court found that the title was founded on the award.

7. But as said earlier, the crucial question is what the award purports to do? As seen, the arbitrators in the award dated October 19, 1963 declared that Kartar Lal is benamidar, the appellant had contributed half the consideration of the sale price and is the owner of half the house with effect from the date of the purchase, namely April 4(7), 1959 and both the brothers, each as owner, are entitled to half the rent.

8. The contention of the counsel for the respondents that the award creates therein right, title and interest in favour of the appellant and extinguishes that of Kartar Lal who had sale certificate in accordance with the law; his title gets divested only when the award was registered; its non-registration renders it inadmissible as evidence of title; since the foundation of title, therefore, of the appellant, is based on the award, it cannot be looked into, nor can it be considered, are devoid of force. In Uttam Singh Duggal and Co. v. Union of India (C.A. No. 162 of 1962 dated October 11, 1962), the facts therein were that pending civil suit the Union of India called upon the arbitrator to adjudicate the dispute between the appellant and the Union. The award was made after deciding the dispute. It was contended for the appellant that since the award was earlier made and became final, but was not registered, there cannot be a second reference on the same dispute. The High Court held that the first award did not create any bar against the competence of the second reference. On appeal, relying on Ss. 33 and 17 of the Arbitration Act this Court held that “all claims which are the subject matter of the reference to arbitration merged in the award which is pronounced in the proceeding before the arbitrator and that after the award has been pronounced the rights and liabilities of the parties in respect of the said claims can be determined only on the basis of the said award,” and thereafter no action can be started on the original claim which had been the subject matter of the reference. An award between the parties is entitled to that respect which is due to the judgment of a Court of law to serve. Therefore, it was held that the second reference was incompetent. In Kashinathsa Yamosa Kabadi v. Narsingsa Bhaskarsa Kabadi, (1961) 3 SCR 792 at 806, on a question whether an award made in arbitration out of Court and accepted by the parties, in the absence or registration, could be pleaded in defence as a binding decision between the parties, this Court held at page No. 806 (of SCR): thus:

“It may be sufficient to observe that where an award made in arbitration out of Court is accepted by the parties and it is acted upon voluntarily and a suit is thereafter sought to be filed by one of the parties ignoring the acts done in pursuance of the acceptance of the award, the defence that the suit is not maintainable is not founded on the plea that there is an award which bars the suit but that the parties have by mutual agreement settled the dispute, and that the agreement and the subsequent actings of the parties are binding. By setting up a defence in the present case that there has been a division of the property and the parties have entered into possession of the properties allotted, defendant No. 1 is not seeking to obtain a decision upon the existence, effect or validity of an award. He is merely seeking to set up a plea that the property was divided by consent of parties. Such a plea is in our judgment not precluded by anything contained in the Arbitration Act.”

It is, therefore, clear that though the award was not registered, it could be relied on as a defence to show that parties had agreed to refer the dispute to private arbitration, the award made thereon was accepted by the parties and acted upon it.

In Champalal v. Mst. Samarath Bai, (1960) 2 SCR 810 at 816 , this Court held that:

“the filing of an unregistered award under S. 49 of the Registration Act is not prohibited; what is prohibited is that it cannot be taken into evidence so as to affect immoveable property falling under S. 17 of that Act.”

In Addanki Narayanappa v. Bhaskara Krishtappa, (1966) 3 SCR 400 at 410 and 411 , this Court held that a document of dissolution only records the fact that the partnership had come to an end. It cannot be said to convey any immovable property by a partner to another expressly or by necessary implication, not is there any implication. It was held that such a deed was not compulsorily registrable under S. 17(1)(b) of the Registration Act. In Commr. of Income-tax, West Bengal, Calcutta v. Juggilal Kamalapat, (1967) 1 SCR 784 at 790 , the deed of relinquishment was accepted by one partner in favour of the other partners in the partnership firm including immovable property. This Court held that the deed of relinquishment was in respect of individual interest of a partner in the assets of the partnership firm including immovable property was valid without registration. All the assets of the partnership firm vested in the new partners of the firm. This Court approved the Full Bench judgment of the Lahore High Court in Ajudhia Pershad Ram Pershad v. Sham Sunder, ILR (1947) Lahore 417, wherein the Full Bench held that assignment of the interest of partnership of a partner is to be regarded as movable property, notwithstanding the fact that at that time when it was charged or sold, the partnership assets included immovable property. In Lachman Dass’s case (supra), this Court noted the distinction between the declaration of an existing right as a full owner of the property in question and creation of a right in immovable property in praesenti. In that case since a new right was created under the award in favour of the respondents, it was held that the award required registration and non-registration rendered the award inadmissible in evidence under S. 49.

9. In Kale v. Dy. Director of Consolidation, (1976) 3 SCR 202 , this Court held that a family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. Family arrangements are governed by principles which are not applicable to dealings between the strangers. The Court when deciding the rights of parties under family arrangements, consider what is the broadest view of the matter, having regard to considerations which, in dealing with transactions between persons not members of the same family, would not be taken into account. If the terms of the family arrangement made under the document as a mere memorandum, itself does not create or extinguish any right in immovable property and, therefore, does not fall within the mischief of S. 17(1)(b) of the Registration Act and is, therefore, not compulsorily registrable.

10. It is, thus, well settled law that the unregistered award per se is not inadmissible in evidence. It is a valid award and not a mere waste paper. It creates rights and obligations between the parties thereto and in conclusive between the parties. It can be set up as a defence as evidence of resolving the disputes and acceptance of it by the parties. If it is a foundation, creating right, title and interest in praesenti or future or extinguishes the right, title or interest in immovable property of the value of ` 100 or above it is compulsorily registrable and non-registration render it inadmissible in evidence. If it contains a mere declaration of a pre-existing right, it is not creating a right, title and interest in praesenti, in which event it is not a compulsorily registrable instrument. It can be looked into as evidence of the conduct of the parties of accepting the award, acting upon it that they have pre-existing right, title or interest in the immovable property .

11. In the light of above conclusion and of the contents of the award referred to hereinbefore, the necessary conclusion is that the award did not create any right, title or interest in the appellant for the first time, but it declared the pre-existing factum, namely the appellant and Kartar Lal purchased the property jointly and that Kartar Lal was the benamidar and that both of the brothers had half share in the house with a right to enjoyment of the property in equal moiety. Thus the award is not compulsorily registrable. The contention of the counsel for the respondent is that if the unregistered award is accepted as a foundation and received in evidence effecting interest in immovable property, there is possibility of avoiding registration and by indirect process title gets conferred, defeating the mandate of S. 17 and S. 49 of the Registration Act. Each case must be considered from its own facts and circumstances; the pre-existing relationship of the parties; the rights inter vivos and the interest or rights they claimed and decided in the award and the legal consequences. On the facts of this case we hold that the appellant and Kartar Lal being tenants in common, migrants from Pakistan after partition, the appellant being Govt. servant, obviously, his brother Kartar Lal purchased the property for their benefit as coparceners or co-owners. In that view it must be held that the award does not have the effect of creating any right in praesenti, nor is it an attempt to avoid law. The award was made rule of the Court a decade earlier to the date of the initial agreement of sale.

12. The next question is whether the Courts below were justified in decreeing the suit for specific performance. Section 20(1) of the Specific Relief Act, 1963 provides that the jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief, merely because it is lawful to do so; but the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal. The grant of relief of specific performance is discretionary. The circumstances specified in S. 20 are only illustrative and exhaustive. The Court would take into consideration the circumstances in each case, the conduct of the parties and the respective interest under the contract.

13. Section 12 provides for specific performance of part of contract. Sub-section (1) thereof postulates that except as otherwise hereinafter provided in the section, the Court shall not direct the specific performance of a part of a contract. Sub-section (4) thereto envisages that when a part of the contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed, the Court may direct specific performance of the former part. Section 10(b) provides that “except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the Court, be enforced -(b) when the act agreed to be done is such that compensation in money for its non-per-formance would not afford adequate relief. it is contended for the appellant, that the first respondent prayed for refund of the earnest money; since the agreement was in respect of the entire property including the half share of the appellant, the Courts below, instead of decreeing specific performance of the contract, ought to have awarded refund of the earnest money. The decree for specific performance in the circumstances is illegal. Spry in his “Equitable Remedies, 4th Edn., 1990” stated at page No. 59 that “in the absence of special circumstances rendering equitable relief appropriate – the Courts will not grant specific performance, if damages would leave the plaintiff in as favorable a position in all material respects, it is now necessary to reassess earlier decisions in which damages have been held to be an adequate remedy.” At page No. 60 it is stated that, “A special difficulty arises where even if the agreement in question is performed in specie, the right that the purchaser will obtain will probably not amount to more than a right to receive payments of money, such as when the land in question will probably be compulsorily acquired pursuant to statutory authority, but the better view is that damages are not an adequate remedy even in cases of this kind.” At page No. 106 it was further stated that, “although it was said in a number of early cases that Courts of equity will not order specific performance of part only of a contract, this limitation has no basis in principle, and it is now accepted that in a number of diverse circumstances partial enforcement in specie is appropriate.” At page No. 135 it is stated that, “it is well established that generally a plaintiff will not succeed in obtaining an order of specific performance unless he is able to show sufficiently and clearly the existence of a contract that is valid and enforceable at law at the time when the order is sought.” At page No. 158 it is stated that, “whenever there is an active misrepresentation, whether it is innocent or fraudulent, or a non-disclosure in circumstances where there is a duty of disclosure, and according to the appropriate legal and equitable rules, the defendant against whom proceedings for specific performance are brought has a right to rescind, it follows as a matter of course that specific enforcement will not be ordered against him.” At page No. 199 it is stated that the Court may take account of the fact that there are “third persons so connected with the defendant that, by reason of some legal or moral duty which he owes them, it would be highly unreasonable for the Court actively to prevent the defendant from discharging his duty.” At page No. 312 it is stated that, “it has been held by Courts of equity that specific performance will not be granted to a vendor if, although he has established a good title on the balance of probabilities, that title is sufficiently uncertain to be regarded as a doubtful title in the sense in which that term is understood in the material authorities; for otherwise it might appear in subsequent proceedings that a title that the purchaser has obtained a deficient, and there might be no way in which he could be properly compensated.”

14. The contention of the respondent that the appellant and Kartar Lal colluded to bring the award into existence to defeat the rights of the first respondent is devoid of substance. The award was made the rule of the Court 10 years prior to the contract of sale. Kartar Lal even in this Court stood by his contract in favour of the respondent which would belie the plea of collusion.

15. In view of the finding that the appellant had half share in the property contracted to be sold by Kartar Lal, his brother, the agreement of sale does not bind the appellant. The decree for specific performance as against Kartar Lal became final. Admittedly the respondent and her husband are neighbours. The appellant and his brother being co-parceners or co-owners and the appellant after getting the tenant ejected both the brothers started living in the house. As a prudent purchaser Joginder Nath ought to have made enquiries whether Kartar Lal had exclusive title to the property. Evidence of mutation of names in the Municipal Register establishes that the property was mutated in the joint names of the appellant and Kartar Lal and was in joint possession and enjoyment. The Courts below, therefore, have, committed manifest error of law in exercising their discretion directing specific performance of the contract for the entire property. The house being divisible and the appellant being not a consenting party to the contract, equity and justice demand partial enforcement of the contract, instead of refusing specific performance in its entirety, which would meet the ends of justice. Accordingly we hold that Joginder Nath having contracted to purchase the property, it must be referable only in respect of half the right, title and interest held by Kartar Lal, his vendor. The The first respondent being successor in interest, becomes entitled to the enforcement of the contract of the half share by specific performance. The decree of the trial Court is confirmed only to the extend of half share in the aforestated property. The appeal is accordingly allowed and the decree of the High Court is set aside and that of the trial Court is modified to the above extent. The parties are directed to bear their own costs throughout.